While I have nothing against either of them, I think some people can get carried away. Libertarians are a pretty tolerant bunch, but I dare only voice concerns about one sacred cow at time. This time it will be Bitcoin.

I think Bitcoin is a fascinating idea, and I love the notion of a decentralized and competitive private currency. But… it’s not money. Here’s why.

Money must serve three basic functions, including as a:

Store of valueMedium of exchange
Unit of account

Does Bitcoin fulfull any of these? No, because the value of Bitcoins is extremely volatile. Any currency that can lose 60% of its value in a day is the very definition of unsound.

It is possible to do business in terms of a risky asset–like pesos, Zimbabwe dollars, junk bonds, or dot-com stock–but it’s extremely difficult and poses huge liabilities for any long-term contract. Just imagine trying to adjust your price tags over the course of today’s trading, based not just on the current exchange rate but on what you guess it will be worth tomorrow or next month.

Enjoy the Federal Reserve Bank, and the U.S. Dollar. Both have brought relative stability to the lives of people all over the world... until now. When the Fed and the Dollar collapse (because of their inherent greed), there will be so much panic and destruction, that the fluctuations in Bitcoin will look like a picnic on the beach.